International trade, or the voluntary exchange of goods and services across national boundaries, increases the well-being of all participants by promoting economic efficiency in a variety of ways. International trade allows each country to concentrate on its most productive activities. Trade also gives firms access to the large international market, allowing them to increase output and lower average costs by taking advantage of scale economies. Access to world markets for raw materials, capital goods, and technology also improves productivity. Foreign competition forces domestic monopolies or oligopolies to lower prices, and imported goods provide consumers with greater choice. Finally, a liberal trade environment can provide a better climate for investment and innovation, thus raising the rate of economic growth.
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